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What Are the Characteristics of a Successful Shared Savings Program?


The Centers for Medicare and Medicaid Services (CMS) recently issued interim proposed regulations for the new Medicare Shared Savings Program for accountable care organizations (ACOs)—groups of health care providers that agree to take collective responsibility for the quality and costs of treatment for a population of patients. The Shared Savings Program, which was created by the Affordable Care Act and is slated to begin in 2012, represents an important step toward achieving better health, better care, and lower costs.

The Commonwealth Fund’s Commission on a High Performance Health System has identified 10 essential principles to help ensure the success and spread of ACOs. In this post, we examine how well the proposed rule aligns with those principles, and identify issues for CMS to consider in finalizing it.

1. A strong primary care foundation.
In the proposed rule, CMS addresses this issue implicitly through performance measurement and functional requirements associated with the medical home, which emphasizes timely access to care and is the core of a system that delivers evidence-based, coordinated care. Allowing ACOs flexibility in determining how to meet these goals is consistent with the Commission’s recommendations.

2. Accountability for quality of care, patient care experiences, population outcomes, and total costs.
CMS proposes a fairly extensive list of performance measures that will ultimately be used to determine shared savings payments. To help ACOs ramp up their capacity to report these measures, CMS is focusing on reporting only during the first year, moving to a modest threshold performance level in subsequent years, with increased rewards for performance above that threshold. CMS should continue to move as quickly as possible toward higher minimum standards of performance.

3. Informed and engaged patients.
In the proposed rule, CMS focuses strongly on patient-centered care. For example, at least one beneficiary must be on the ACO’s governing board, all beneficiaries must be notified that their provider is in an ACO, and ACOs must describe specific processes by which patients and their caretakers will be able to participate in their health care choices. ACOs will also be required to collect patient-reported information on care experiences and incorporate it into their individualized care plans.

4. A commitment to serving the community.
CMS requires each ACO to demonstrate that it evaluates the health needs of its population, which includes taking diversity into account. Further, ACOs must identify high-risk individuals and develop individualized care plans for targeted patient populations. Although ACOs are encouraged to include community stakeholder representatives on the governing board, CMS should continue to work with ACOs to ensure that the community is fully involved and that all segments of the population have access to accountable care. Federal officials should focus on the health of the community in assessing the success of the ACO program.

5. Criteria for entry in the Shared Savings Program and continued participation that emphasize accountability and performance.
For the most part, the proposed rule allows ACOs flexibility in the types of tools they can use to meet functional and performance standards, and in the types of organizations and configurations of providers that can participate. Although there are limitations on the types of providers that can independently apply to be an ACO, any type of Medicare provider can participate in the program by partnering with an ACO. CMS should always work to ensure that the goals of the program are consistently and clearly stated, and that performance is paramount in determining continued participation.

6. Alignment of payers to provide appropriate and consistent incentives.
Most physician practices have both Medicare patients and privately insured patients. If public and private payers work together to align the incentives they provide, the effectiveness of those incentives in improving quality and controlling costs for all patients will be maximized. The Commission recommends that CMS work with both public payers and private insurers to provide consistent payment incentives, but the proposed rule is fairly silent with regard to multipayer alignment. Moving forward, CMS should seek greater alignment of core measures with other payer initiatives. Several of the pilots initiated by the new Center for Medicare and Medicaid Innovation indicate that CMS recognizes the value of multipayer alignment, and some of the major ACO initiatives currently in place involve private payers in arrangements with provider organizations.

7. Payment that reinforces and rewards high performance. 
CMS proposes to require minimum levels of savings before ACOs can qualify for any shared savings payments to ensure that providers are rewarded for actual improvements in performance and not random fluctuations in costs. An appropriate balance should be struck between these two considerations, recognizing the importance of providing a strong business case for becoming a successful ACO. CMS makes adjustments to help smaller ACOs, and ACOs that include safety-net providers, achieve shared savings. CMS, however, should continue to investigate ways to reduce the delay between successful performance and the payment intended to reward it.

8. Innovative payment methods and organizational models.
CMS has proposed an approach that allows ACOs the option in the first two years to receive a higher share of any savings they achieve if they agree to take responsibility for a share of any excess spending. This two-sided approach will apply to all ACOs in the third year. CMS, through its Innovation Center, should consider alternative payment models in the Shared Savings Program that also incentivize higher-value health care, including bundled payments and risk-adjusted global fees.

9. Balanced physician compensation incentives.
Although the proposed rule is silent with regard to the compensation of individual physicians, CMS incorporated a robust measure set in the proposed rule, with any shared savings payments to be contingent upon meeting quality standards. CMS also plans to monitor ACOs for actions that may inhibit patients from seeking care, particularly outside of the ACO network. This includes a proposal to require ACOs to submit a description of how it will use the shared savings to meet the goals of the program.

10. Timely monitoring, data feedback, and technical support for improvement.
The amount of data CMS proposes to share with ACOs can greatly improve the ability of these organizations to undertake innovations leading to higher-value care. It will be critical for CMS to work with ACOs both to make sure that the reports include all the information they need to succeed and to help them get the most out of this information—for example, by figuring out ways to make the data available in a more timely fashion. The proposed rule does not detail how CMS will facilitate access for ACOs to the technical support they may need. In addition, there is no mention of working with other payers to alleviate administrative burdens and resolve data transparency issues. This may be something that CMS and all other payers need to pursue outside the ACO regulations.

This commentary reflects the opinions of the authors and not necessarily those of the Commission on a High Performance Health System, The Commonwealth Fund, or the Fund’s board of directors.

Publication Details



M. Zezza and S. Guterman, What Are the Characteristics of a Successful Shared Savings Program?, The Commonwealth Fund Blog, April 2011.